Photo: norsez via flickr
Yum! Brands does 40 per cent of its business in China. The owner of KFC, Taco Bell and Pizza Hut capitalised on the emerging market before any other major chain and reaped the benefits. But Yum!’s KFC is facing major obstacles in China, according to a recent report by Citi.
The biggest one is increased competition. Chains like McDonald’s and Burger King have stepped up their game in China.
According to Citi:
We believe that KFC has seen the biggest impact from intensified competition, given KFC has the largest and most established store base of the global restaurant chains operating in China. We believe sales gains by new KFC and other western concepts (notably MCD), as well as popular domestic chains, such as Laibibao (fast food, rice), Zhengongfu (national fast food chain), Jijixiaosheng and Yonghe Bean Milk (Taiwanese national fast food chain), have been cannibalising existing KFC stores.
Citi also notes that a “weaker Chinese consumer is having a material affect on traffic” in KFC stores.
KFC sales are still expected to grow, just at a much slower pace than last year.
Here’s a graph showing same store sales at Chinese restaurant chains, including KFC, McDonald’s and Starbucks:
Photo: Citi report
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